Bloomberg News

British Airways Parent IAG Favors More Mergers, CEO Walsh Says

By Robert Wall
April 11, 2013

IAG SA (IAG) Chief Executive Officer
Willie Walsh, who led the company’s creation via a merger of
British Airways and Spain’s Iberia, said he favors a further
bout of consolidation to boost revenue while paring costs.

Airline alliances like Oneworld, of which IAG is a leader,
exist only because of restrictions on mergers, for which the
three main global groupings are a “poor substitute,” Walsh said
today at the CAPA aviation conference in Powerscourt, Ireland.

International Consolidated Airlines Group SA was formed
through a combination of BA and Iberia in 2011 and has since
bought BMI from Deutsche Lufthansa AG (LHA), folding the carrier into
its U.K. business to add operating slots at London’s Heathrow
airport while paring the overall headcount. Walsh is also
bidding for full control of Barcelona-based Vueling Airlines SA. (VLG)

The CEO said that in addition to limits on ownership for
IAG beyond the European Union, the bloc’s own rules that assess
airline agreements and mergers based on the competitive
positions of carriers at specific hubs are also a frustration.

‘Mistake’

“The big concern I would have with competition policy in
the EU is it is looking at the European market, rather than at a
global basis,” he said. “That is a huge mistake.”

The Oneworld alliance has taken a more cautious approach to
expansion than its rivals and numbers 12 full members, with
three other carriers, including Qatar Airways Ltd. and Malaysian
Airline System Bhd., in the process of joining. The Star group,
which includes Lufthansa, has 27 full members.

BA acted as sponsor for the recruitment of Qatar Air, which
marked the first instance of one a major Gulf carriers joining a
global alliance, and Walsh said his European rivals are catching
on, citing Air France-KLM Group (AF)’s code-share deal with Etihad
Airways PJSC of Abu Dhabi and their talks about a deeper accord.

“That for them is like talking to the devil,” the 51-year-
old Irishman said. “It’s a true reflection of the change our
industry is going through.”

Walsh said he’s supportive of the Gulf-carrier boom and the
role played by governments there in fostering growth, something
carriers including Air France-KLM and Germany’s Lufthansa had
attacked in the past as amounting to state support.

“Rather than inhibit their development they have
facilitated their development,” the CEO said. “To me, that is
how our industry needs to develop.” Walsh has previously spoken
out against U.K. government restrictions on growth at Heathrow.

Finnair Oyj (FIA1S), also a Oneworld member, is seeking bilateral
agreements outside the group, Allister Paterson, senior vice
president, commercial, said at the CAPA conference. Joint
ventures of the kind that BA and Iberia have with American
Airlines also offer broader benefits than alliances, allowing
timetable coordination and the sharing of costs and revenue.

To contact the reporter on this story:
Robert Wall in Powerscourt, Ireland, via
rwall6@bloomberg.net

To contact the editor responsible for this story:
Benedikt Kammel at bkammel@bloomberg.net